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Accounts/Cess

TEXTILES COMMITTEE (CESS) RULES

MINISTRY OF COMMERCE

NOTIFICATIONNew Delhi, the 31st March 1975

G.S.R.172(E).- Whereas the draft of the Textiles Committee (Cess) Rules, 1975 was published as required by sub-section (1) of Section 22 of the Textiles Committee Act, 1963 (41 of 1963), at pages 281-284 of the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) dated the 25th February, 1975, under the notification of the Government of India in the Ministry of Commerce No.G.S.R.55(E), dated the 25th February, 1975 inviting objections and suggestions from all persons likely to be affected thereby, till the expiry of a period of thirty days from the date of publication of the said notification in the Official Gazette;

And whereas the Gazette was made available to the public on the 4th March; 1975;

And whereas objections and suggestion received from the public on the said draft have been considered by the Central Government;

Now, therefore, in exercise of the powers conferred by section 22 of the said Act, the Central Government hereby makes the following rules, namely:-

Short title & commencement.- (1) These rules may be called the Textile Committee (Cess) Rules, 1975,(2) They shall come into force on the 1st day of April, 1975.

Definitions.- In these rules unless the context otherwise requires-

“Act means Textiles Committee Act; 1963 (41 of 1963)

(a)

(b)

“Assessing Officer” means an officer appointed by the Committee for the purpose of assessing the amount of cess;

(c)

“Cess” means the duty of excise leviable under sub-section (1) of Section 5A;

(d)

“form” means a form annexed to these rules

(e)

“manufacturer” means the manufacturer referred to in sub-section (3) of Section 5A;

(f)

“section” means a section of the Act.

Maintenance of registers.- Every manufacturer shall maintain a register of production indicating therein the total quantity of textiles or textile machinery manufactured by him during a month, the quantity (if any) used by him for the manufacturer of another commodity, the quantity removed on payment of duty under the central Excise and salt Act 1944 (1 of 1944), the quantity removed for export without payment of such duty, the total value ad-valorem and the cess payable thereon at the rate for the time being in force.

Submission of month returns-

1.

Every manufacturer shall furnish to the Committee in duplicate, a return in Form A or in Form B, as the case may be, for each month duly signed by him or any other person authorized by him in this behalf so as to reach the Committee not later than fifteen days after the expiry of the month to which the return relates, along with a certified copy of the returns submitted to the central excise authorities under rule 54 of the Central Excise Rules, 1944 for the relevant month.

2.

A return referred to in sub-rule (1) shall be sent by registered post with acknowledgement due.

Revision of returns- If the manufacturer after having furnished the returns discovers any of commission or wrong statement therein, he may revise the return at any time before he receives the notice of demand from the Committee.

Assessing Officer of cess.- (1) The Assessing Officer shall assess the amount of the cess payable by each manufacturer for each quarters on the basis of the data furnished in monthly returns referred to in rule 4.

Notice of demand etc.-

(1)

The Committee shall issue a notice of demand to the manufacturer for payment of the cess assessed under rule 6.

(2)

The manufacturer shall pay to the Committee the amount of cess as demanded by a crossed cheque if he is stationed in Bombay and by crossed Demand Draft in case he is stationed elsewhere, within one month from the date on which he receives such notice from the Committee.

(3)

For the purpose of encashment of the crossed cheques and crossed Demand Draft received under sub-rule (2) the Committee shall open a separate account in a Scheduled Bank.

Assessment when return is not furnished or furnished incorrectly etc.- If any manufacturer fails to furnish the return referred to in rule 4 within the period specified therein, or furnishes a return which the Committee has reason to believe is incorrect or defective, the Assessing Officer may, after giving the manufacturer an opportunity of being heard, assess the amount of cess on the basis of figures obtained from the Central Excise Department or on the basis of the average of the cess levied during the previous two quarters immediately proceeding the quarters for which assessment is being made.

Refund of cess.-

(1)

Any amount of cess paid in excess of the cess payable shall, on an application made by the manufacturer to the Committee within a period of one year from the date of such payment, be refunded to him.

(2)

The claim for refund preferred within the period specified in sub-rule (1) shall be admitted by the Committee after due verification of the original credit.

(3)

The Committee shall send vouchers for the refund of the claims admitted in sub-rule(2), to the Central Government for payment from the Consolidated Fund of India.

Recovery of cess short levied erroneously levied.- When the cess has been short levied through inadvertence or otherwise, or when it is erroneously refunded; the manufacturer chargeable with the cess so short levied or to whom refund has been erroneously made on a notice of demand from the Committee made within one year from the date on which the cess has been paid, shall pay the deficiency or, as the case may be refund the amount paid to him in excess, within a month from the date of receipt of such notice.

Right of the Committee to inspect the production records of the manufacturer.-

(1)

Every manufacturer shall permit the Assessing Officer or any other person authorized in this behalf by the Committee to inspect the accounts and records or production maintained by him for the purpose of verifying the monthly returns furnished by him.

(2)

If as, a result of such inspection, any sum of money is found to be due to the central Government from the manufacturer by way of cess, the Committee shall, within three months of completion of the inspection, issue a notice of demand for the payment thereof within a month from the date of receipt of such notice.

Remittance into the Reserve Bank of India.- The proceeds of the cess shall, immediately after the encashment of the crossed cheques and crossed Demand Drafts received in that behalf, reduced by the cost of collection as determined by the Central Government be remitted by the Committee into the Reserve Bank of India for being credited to the Consolidated Fund of India.

Provision of the Textiles Committee Act & Cess Rules

As per Section 5A(1) of the Textiles Committee Act, a Cess in the nature of excise duty has been imposed on all textiles and textile machinery manufactured in India.

The percentage of Cess is 0.050% advalorem.

The Cess levied under Sub Section (1) of Section 5A shall be in addition to any Cess or duty leviable on textiles or textile machinery under any other law, as per Section 5A(2).

As per Section 5A(3) of the Act, the Cess shall have to be collected by Textiles Committee in accordance with the Rules framed in.

As per Rule 4 of Cess Rules, it is obligatory on the part of every manufacturer of textiles and textile machinery to submit the returns in Form’A’ or Form’B’ as the case may be for assessment of Cess.

As per Section 5E of the Act, by notification, the following categories of textile items have been exempted from payment of Cess leviable under Section 5 of the Act.

In case of default by the manufacturers, the amount of Cess arrears will be recovered as an arrear of land revenue through the Dist. Collector as per Section 5D of the Act.

BRIEF OF JUDGEMENT OF DIFFERENT COURT CASES IN RESPECT OF ASSESSMENT/COLLECTION OF CESS FROM TEXTILES & TEXTILE MACHINERY MANUFACTURERS

The Hon’ble Supreme Court of India in the matter of M/s. Sirsilk Ltd. vs. Textiles Committee & Ors. (Civil Appeal No.863 of 1973), inter-alia, has upheld the legality and validity of the Textiles Committee Act, 1963 in respect of assessment and collection of Cess from the manufacturers of textiles and textile machinery.

The judgment in respect of Textile Processing Units –

Since the definition of manufacturer has not been defined in the Textiles Committee Act 1963 as amended in 1973, the processors were clarified their status as manufacturer taking into account the decision given in the Hon’ble Supreme Court in the matter of M/s. Sirsilk Ltd. Vs. Textiles Committee & Ors. (AIR 1989 SC 317) as under:-

The Hon’ble Supreme Court of India has considered the scheme of the Textiles Committee Act, in the case of M/s. Sirsilk Ltd. and others Vs. Textiles Committee & Ors (AIR 1989 SC 317) and held that the Industries (Development & Regulation) Act, 1951 and the Textiles Committee Act, 1963 can be considered to be statutes of Pari Materia. The object of either or these two acts is to protect and to assist in the development of textile industry. In the first schedule to the Industries (Development and Regulation) Act there is a list of Industries engaged in the manufacture or production of any of the article mentioned under each of the headings or sub headings. In item No.23, Industries viz. Textiles are covered and read as under. “ ‘23’ Textiles (including those dyed, printed or otherwise processed)”. Thus processing of textiles amounts to manufacturing.

The Hon’ble Supreme Court in the matter of M/s. Ujagar Prints – Vs- Union of India & Ors. (AIR 1989 SC 516) has conclusively held that job work carried out by the Independent Processors amounts to manufacturing of textiles and therefore falls under the purview of Central Excise. Textiles Committee Cess, being in the nature of excise duty, is therefore applicable to the Independent Processors.

In the case of Nath Bros. Exim. International Ltd. –Vs- Union of India & Ors. (AIR 1997 Delhi 383) the Hon’ble Delhi High Court has clearly opined that the materials claimed for exemption of Textiles Committee Cess should directly come, in finished form, from the Powerlooms (less than 50 looms) and handlooms, and should not under go any further processing. The processed materials thus attract the Textiles Committee Cess.

In the case of Nath Bros. Exim. International Ltd. –Vs- Union of India & Ors. (AIR 1997 Delhi 383) the Hon’ble Delhi High Court has held that though the term ‘manufacturer’ is not defined in the Act, definition of manufacturer in Central Excises Act, makes it clear that expression ‘manufacture’ includes on any process ancillary to completion of a manufactured produced and the word manufacturer includes not only person who employs hired labour, in manufacture of goods but also any one who engages in their production or manufacturer on his own account, if those goods are intended for sale. It is also stated that inclusion of the expression “exporters” in Section 12 makes the legislative intent abundantly clear that the exporters are also covered under the Act.

Assessment and collection of Cess in respect of RMG/Hosiery Manufacturers.

The Hon’ble High Court of Judicature at Madras in the case matter of M/s. South India Hosiery Manufacturers’ Association, Tirupur –Vs- Textiles Committee & Ors. (WP No.8085 of 94 and WMP No.12301 of 94) has upheld the collection of cess on Garment/Hosiery by the Textiles Committee under Textiles Committee Act & Cess Rules. The gist of the order is as follows:

The levy and collection of Cess from Garment/Hosiery manufacturers in terms of Section 5A was neither illegal nor arbitrary.

The “manufacture” covers also conversion of any form of textile goods into another such form and the word “manufacturers” includes also all persons who employ hired labour or who engage in production or manufacture of textile goods on their own account.

Upheld the collection of Cess from all manufacturers irrespective of the fact as to whether they are covered under organized or unorganized sector.

The action of Assessing Officer in collecting the sales turnover figures from the Commercial Tax Department for assessment cannot be said to be an erroneous one, in the absence of returns.

The time limit of one year stipulated in Rule 10 of Cess Rules is nothing to do with the submission of returns and payment of cess by manufacturers of textiles.

The Hon’ble High Court of Judicature at Bombay in the case matter M/s. J.K. (Bombay) Limited vs. Union of India & Ors. (WP No.160 of 1995) has also upheld the collection of cess from RMG manufacturers.

Assessment and Collection of Cess in respect of 100% Export Oriented Units.

The Hon’ble High Court of Judicature : ANDHRA PRADESH AT HYDERABAD in the case matter M/s Sanghi Spinners India Ltd. –vs- Union of India & Ors. (WP No. 18171 of 2000) has upheld the policy decision of Govt. of India not to grant exemption to the 100% EOUs from payment of Textiles Committee Cess.

Time limit for the purpose of assessment of Cess.

The Textiles Committee Act does not prescribe limitation for the purpose of assessment of cess. Hence, the law of limitation does not apply to Textiles Committee. The Hon’ble Supreme Court of India in the matter France B. Marines V/s. Mafaida Maria Teresa Rodrgnes (reported in 1999 AIR SCW, pg.3216) has held that when the legislative in its wisdom thought it appropriate not to prescribe the period of limitation for proceeding under the Act, the Court cannot apply the provision by implication

All the 100% EOU engaged in manufacturing of textiles and textile machinery are liable for submission of returns and payment of Cess.

As per the provision of the Textiles Committee Act & Cess Rules, all the manufacturers of Textiles & Textile machinery are liable for submission of returns and payment of Cess. Few manufacturers who concentrate under the category of 100% EOU in terms of Industrial Resolution issued by the Ministry of Commerce were having doubt that they are exempted from Cess. M/s. Nagareeka Exports Ltd., one among the 100% EOU manufacturing textiles had approached the Tribunal as well as the Hon’ble High Court of Mumbai aggrieved by the assessment of Cess carried out under the Act. However, Hon’ble Tribunal & Hon’ble Divisional Bench of High Court upheld the collection of Cess under the Act and dismissed the petition by order dtd. 28.2.03. The gist of the order is as follows:

Section 5A(2) of the Act provides that duty leviable on Textiles under Sub Section (1) shall be in addition to any Cess or duty leviable on the Textiles or Textile Machinery under any other law for the time being in force.

Section 5A(1) of the Act provides that Cess under the said Act shall be leviable and collected for the purpose of this Act.

The exemption and inclusion of the levy of Cess have been spelt out in the Act itself and unless there is a notification issue under Section 5(E) of the Act, the Petitioner is not entitled to claim exemption from levy of Cess.

Since the Government of India has taken policy decision not to grant exemption to export Oriented Units for payment of Textiles Cess, in the absence of notification, it is not possible to accept the contention of the Petitioner.

In view of the above judgment , all the 100% EOU engaged in manufacturing of textiles and textile machinery are liable for submission of returns and payment of Cess.